later than expected but still way before Microsoft' Kinect hits the market (coincidentally, I just played with Kinect for the first time this morning, courtesy of Microsoft, and absolutely loved it).
Anyway, PlayStation Move relies on the PlayStation Eye cam, along with internal motion sensors in the PlayStation Move motion controller and the PS3 system itself, to detect the movement, angle, and position in 3D space of the user, thereby allowing users to play "as if they are within the game".